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Point Of Reference

Providing references for former employees could put your business at risk.

An employee you fired has given your name as a reference for a new job. You'd like to save someone else from trouble by telling the prospective employer what you know. However, your lawyer has advised you not to give out references.

If you haven't listened to that advice before, you'd better start listening now. For the past decade, attorneys have advised employers not to provide references because a former employee might sue over defamation. In February, the U.S. Supreme Court issued a ruling that gives employers an even stronger reason to clam up. The ruling effectively extends the reach of federal anti-discrimination laws to former employees, who may now sue you over a bad reference by claiming your motive was retaliation.

The case, Robinson v. Shell Oil Co., concerns a man discharged from his job at Shell. The former employee filed a charge with the Equal Employment Opportunity Commission, claiming he'd been fired because of his race. While that claim was pending, he applied for a job with another company, which contacted Shell for a reference. After learning the reference was negative, he filed a lawsuit--this one claiming the bad reference was in retaliation for the discrimination claim. (Under Title VII of the Civil Rights Act of 1964, it's illegal to retaliate against an employee who has sought protection under the act.)

Before deciding whether Shell intended to retaliate, the courts had to determine whether Title VII applies to former employees. The District Court dismissed the case, ruling former employees are not protected. The Fourth Circuit of the U.S. Court of Appeals agreed. But because other courts are divided on the issue, the U.S. Supreme Court agreed to hear the case.

The court's February 1997 ruling noted that the language of the act is ambiguous and concluded it was "more consistent with the broader context of Title VII" to hold that former employees are protected.

"This decision expands the reach of civil rights laws," says Patrick Falahee, a Chicago attorney specializing in employment law. "It's clear what direction the court is heading."

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This article was originally published in the June 1997 print edition of Entrepreneur with the headline: Point Of Reference.

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